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Bad faith in philanthropy and trademark registrations: what goes around, comes around

On 20 March 2013, the Court of Turin issued a landmark ruling with regards to the registration of trademarks in bad faith.

The trademarks at issue are associated with the most famous prize for excellence in literature in Italy, awarded annually since 1982. Over the last thirty years the prize, originally established to encourage young people to read, has gained significant international recognition and prestige.

In 2009, prestige turned to notoriety, when the association responsible for issuing this prize was dissolved following allegations that its president was using the organization for embezzlement of (possibly) millions of euros provided to the association in the form of public grants. In the aftermath of this scandal, the association was liquidated in 2010, and all of its intangible assets – including the right to the name, which preceded the cited trademarks - were purchased by a Piemontese foundation.

Meanwhile, however, it emerged that instead of registering the trademarks associated with the literary prize in the name of the association (as should have been done), its president in fact registered them in his own name. This allowed him to enter personally into a series of licensing contracts with the association (which he controlled) for the use of the trademarks in exchange for sizeable royalties. In 2011, following the dissolution of the association and sale of its assets, he then sold the rights to the trademarks to a third party.

Thus, the foundation which purchased the intangible property rights from the association, represented by Massimo Sterpi and Nicoletta Galizia of Studio Legale Jacobacci in Turin, brought an action in the Court of Turin alleging (among other claims) that the registration of these trademarks by the association’s president occurred in bad faith and requesting the court to establish (1) the nullity of the registration, (2) their right to the name of the association, and, consequently, (3) their rightful ownership of the trademarks as a result of their purchase of all the intangible assets of the association in 2010.

After hearing arguments by both sides, the Court found for the foundation, stating that the registration of the trademarks of at issue by the president of the association was illegal because it occurred “in bad faith and with the aim to obtain unjust enrichment” as was demonstrated, in particular, by the specific license contracts between the president and the association. Further, having registered the trademarks in bad faith, the subsequent contract for sale of the same was similarly void.

The Court continued by declaring that in consideration of the fact that the foundation had succeeded to the association through the purchase of its intangible assets, such trademarks should rightfully have been conveyed to the foundation. The Court therefore ordered the immediate transfer of the trademarks to the foundation and condemned the association’s former president and the third party purchaser of the trademarks to pay all legal expenses.